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The countries of central and eastern Europe have pulled through the global political and financial turmoil of the past year with remarkably little economic damage. Neither the US-led war against terrorism, nor the economic slowdown, and the Argentine crisis have seriously undermined economic progress.
The 27 former communist states are heading for their fourth successive year of the GDP growth, the longest sustained expansion since the collapse of the Soviet bloc. According to the European Bank for Reconstruction and Development (EBRD), the region should see the GDP growth of more than 3.3 per cent this year. Foreign direct investment is forecast to exceed a record $33 billion, 25 per cent up on 2001.
Yet many bankers and business people are nervous. They worry that the upheavals in world financial markets may have further to run and cause greater disturbances in the global economy, including central and eastern Europe. The region also faces important political challenges, notably the management of Russia’s evolving alliance with the US in the anti-terrorism war, the maintenance of political stability in the Balkans and Central Asia, and completion of the European Union accession talks embracing the central European and Baltic states.
After 12 years of reforms, the region’s output is still 25 per cent below the 1989 levels. Even in the most advanced states - those bidding for the EU membership - average incomes on a purchasing power basis are only half to those of the western Europe. At the other extreme, many people in the former Soviet Union are so poor they can barely feed themselves or their families. The results are broken homes and abandoned children.
The market-oriented reformers, who have led more than 10 years of economic change, insist the only way of raising the living standards even for the poorest countries, is further economic restructuring. But the powerful vested interests block liberalization, headed by business barons who have taken advantage of the twilight world of the half-reform to build commercial networks that they are now loath to expose to competition or the glare of transparency.
Poland may still be an economy in transition, but as far as the markets are concerned, it has long graduated from the emerging market class. The country, which 10 years ago, was known in capital markets for its Brady bond restructuring, today is part of the euro-zone convergence scene.
Thirteen years of painstaking economic, diplomatic and legal efforts have brought the country to the verge of European Union membership, the triumphant final chapter of its post-cold war reunion with the west. September 11, and Russia’s subsequent rapprochement with the US, have diminished Poland’s geopolitical standing by weakening its claim to be an indispensable eastern ally of America and the EU.
Bulgaria has made enormous progress. The progress towards joining Nato and the EU has been the result of hard work and deft diplomatic manoeuvring. When the war in Afghanistan started, many allies who had offered unconditional support for the US noticeably cooled their enthusiasm. Bulgaria, however, offered every possible assistance. It was a response that has not gone unnoticed in Washington.
September 11, gave Bulgaria an opportunity to erase its negative image. There has been a perception in the West that the change from the communism in Bulgaria was not thorough.
